More on 1099 forms

[S T]

Is a taxpayer considered to have a trade or business if they have two rental units, and then if so, should they be issuing the 1099 forms to the gardener, property manager, handyman, painter, etc? (Presuming none of the aforementioned are Corporations)

If the taxpayer actually is paying a property manager and deducting from the taxpayer's ledger account - would it not be the property manager's duty to issue the 1099 forms?

Normally in (this scenario) the property manager issues a 1099 MISC-Rents to the taxpayer for rents collected- and taxpayer receives a ledger statement for expenses for the year and then a net deposited to the taxpayer's account or check issued.



Sandy

[dsi]

My property management clients have always issued the 1099's to the contractors.

[Snaggletooth]

Yes and No

Sandy I think the gardeners, etc. receive a 1099-MISC even if the activity is rent, because the expenses would still be classified as a "business deduction."

However, I guess I would back off on the commissioned manager. The 1099-MISC requirements are based upon Cash Payments during a calendar year. If the "payments" are withheld from proceeds, then there are no "Cash Payments." Certainly not within the spirit of 1099-MISC, and does not relieve the manager from reporting the income, but my interpretation nonetheless.

[ChEAr$]

Subcontrator payments in connection with rental property :

1. if services also rented, naturally it's schedule c reporting and therefore 1099-misc are
issued as appropriate.

2. if no services provided, and therefore schedule e treatment, no 1099's required. I base
this on previous discussions here and there and about. Also if you access publication 527 from IRS website and while it is open search for the term "1009". guess what? The term is not found in said document. Dont' you think IRS would call the reader's attention to it if
required?

And do NOT give me the old saw about "publications are not the law".

[Gretel]

I agree with Harlan, even if the rental activity is a LLC. Rental and business are two separate issues hence all the rules for passive activities. I think they are working on having rental activities also issue 1099's, but that is for the future.

A Management company is a business and therefor have different rules.

Don't ask me to provide something written in stone.

[ChEAr$]

Don't ask me to provide something written in stone.

Not to worry, no one will accuse you of being Moses.

Speaking of which, maybe what we need are the Ten Commandments of
good tax practice.

1. Thou shalt always follow the dictates of circular 230.

2. ?

[erchess]

Someone Please Say So If I Am Wrong

I don't think the number of rental units has anything to do with the principles of their tax treatment. I think that if most users stay only days to weeks or if personal services are provided you have a business and use Sch C otherwise for the majority of real property rental situations you use Sch E. (So far I think I am agreeing with everyone.)

Now here's where I differ.

I think if there is a property manager who does the actual paying and passes on to the owner rent minus expenses including the agent's fee then the Agent would normally be responsible for any 1099s On the other hand in the unusual (I think) situation where the owner receives the total rent and pays everyone including the manager then absent a contract that stipulates otherwise it would be the owner who would be responsible for any 1099s. I also think that the taxing agency will always penalize the owner for tax related misdeeds and leave the owner to potentially persuade a court that someone else should make the owner whole.

And I certainly didn't know that there was any rule to the effect that owners of rental properties that are reported on Sch E never have to issue Forms 1099M but I am now almost persuaded that such a rule exists.

[ChEAr$]

And I certainly didn't know that there was any rule to the effect that owners of rental properties that are reported on Sch E never have to issue Forms 1099M but I am now almost persuaded that such a rule exists.

What is a 1099M form? Haven't heard of that one.

The "rule" is that they do not have to issue a 1099-misc form unless required to, and
I don't see anything in publication 527 that informs the great unwashed (laymen) that
they must do so.

[erchess]

1099M is 1099 Misc

and I am not the first person to use the shortened form on this board.

If you will see the instructions for Form 1099 Misc http://www.irs.gov/pub/irs-pdf/i1099msc.pdf they do specify that the rules for filing this form are the same for all activities that have a profit motive. Note that everyone who files Sch E is declaring a profit motive because a rental not for profit would put the Income on F 1040 L 21 and the expenses on Sch A.

[Gretel]

Paragraph below is from the instructions for Form 1099-Misc. Do we agree that a straight rental activity is not a trade or business?

"Trade or business reporting only. Report on Form compensation plans paid to the estate or beneficiary of a 1099-MISC only when payments are made in the course of your deceased employee are now reported on Form 1099-MISC trade or business."

[erchess]

No Agreement

I am insisting that if a rental activity is conducted with a profit motive and therefore is NOT a Rental Not For Profit (your garden variety Sch E rental and your Sch C Rental of personal property or short term rental or rental with personal service) WOULD use the F 1099 Misc.

This is what the instructions to the F 1099 Misc say. Gretel's quote seems on its face to deal with the unusual case where a payment is made by a pension plan to the estate of a deceased employee or former employee.

[S T]

Thank you all for the posts

Still undecided on what to do for the t/p with the rental units. Since there does not seem to be a penalty for filing a 1099 form, my client has decided to obtain the information and file as needed.

I wish that the regulations in this area were more clear - it is obvious there are opinions that the forms need to be filed and then again, opinions that forms do not need to be filed.

Once again, a good discussion

Sandy

[JG EA]

Still undecided on what to do for the t/p with the rental units. Since there does not seem to be a penalty for filing a 1099 form, my client has decided to obtain the information and file as needed.

I wish that the regulations in this area were more clear - it is obvious there are opinions that the forms need to be filed and then again, opinions that forms do not need to be filed.

Once again, a good discussion

Sandy

Pretty clear to me - People are either in business or in investments. Rentals that are not performing services are not (IMO) required to sent 1099's.

http://www.irs.gov/charities/article/0,,id=158841,00.html

Page Last Reviewed or Updated: August 31, 2009

"Trade or Business" Defined

The term trade or business generally includes any activity carried on for the production of income from selling goods or performing services. It is not limited to integrated aggregates of assets, activities, and goodwill that comprise businesses for purposes of certain other provisions of the Internal Revenue Code. Activities of producing or distributing goods or performing services from which gross income is derived do not lose their identity as trades or businesses merely because they are carried on within a larger framework of other activities that may, or may not, be related to the organization's exempt purposes.